March 21 (Bloomberg) -- Warren Buffett, whose Berkshire
Hathaway Inc. has a bullish derivative bet on Japan’s benchmark
stock index, said the country’s record earthquake created a
buying opportunity for equity investors.

“If I owned Japanese stocks, I would certainly not be
selling them because of the events of the past 10 days or so,”
said Buffett, speaking to reporters in the South Korean city of
Daegu. “Something out of the blue like this, an extraordinary
event, really creates a buying opportunity.”

The March 11 quake and tsunami, which caused the worst
nuclear disaster in 25 years, may result in losses of $200
billion to $300 billion, with most of the costs uninsured,
according to Risk Management Solutions Inc. Japan’s Nikkei 225
Stock Average has declined 12 percent since March 10. Markets in
the nation are closed today for a public holiday. The iShares
MSCI Japan Index Fund, an exchange-traded fund that tracks the
country’s stocks, gained 2.6 percent at 1:24 p.m. in New York.

The Nikkei 225 is one of four indexes across the globe
whose declines since the 2008 financial crisis have forced
Berkshire to post derivative losses on earnings statements.
Buffett, 80, sold put options on the indexes and may be required
to make cash payments when the contracts begin to mature in
2018. Until then, Berkshire reports mark-to-market gains and
losses based on the quarterly performances of the indexes.

“The demand for cement, steel and raw materials will grow
because of the infrastructure spending they will have to do to
repair what has been damaged,” Mobius said today in an
interview on Bloomberg Television’s “In the Loop” program.

‘Larger the Better’

Buffett canceled a trip to Japan where he was scheduled to
visit a factory owned by Iscar Metalworking Cos.’s Tungaloy
Corp. in Fukushima prefecture, home to a damaged reactor. Iscar
Chairman Eitan Wertheimer, who sold his firm to Buffett, said
sales may decline in Japan after Tungaloy halted work at a
factory and evacuated most of the 1,400 employees from the local
headquarters amid radiation leaks.

“It’ll take some time to rebuild, but it will not change
the future of, the economic future of Japan,” said Buffett,
Berkshire’s chairman and chief executive officer.

Berkshire would owe $3.8 billion to derivatives
counterparties if index prices and foreign exchange rates at
maturity were unchanged from the levels of Dec. 31, Buffett said
last month in his annual shareholders’ letter. Berkshire
received premiums of $4.2 billion at the initiation of the
contracts, Buffett said.

South Korea is a “hunting ground” for acquisitions, said
Buffett, who prefers larger companies. Berkshire committed more
than $35 billion to takeovers in the last two years.

“We’re ready to invest, and basically the bigger the
better,” said the billionaire investor. “Large companies
appeal to me and Korea has a number of large companies
obviously, so it’s a hunting ground.”

Buffett reiterated that he is open to buying non-U.S.
companies, while also saying U.S. businesses remain more likely
targets. Berkshire invested in TaeguTec Inc. through Iscar, the
Tefen, Israel-based toolmaking unit.

‘Pile Up Cash’

“We do pile up cash, month by month, and we’re looking for
large businesses to buy,” Buffett said. The U.S. is “the most
familiar to me, so it’s most likely where we would do
something.”

Buffett is seeking deals in the U.S. and abroad as earnings
climb at Omaha, Nebraska-based Berkshire. He agreed this month
to pay about $9 billion for engine-additive maker Lubrizol Corp.
and last year bought railroad Burlington Northern Santa Fe for
$26.5 billion. Berkshire’s cash holdings rose to $38.2 billion
as of Dec. 31, prompting Buffett to tell investors two months
later that his “elephant gun has been reloaded.”

“He can still write a check for $30 billion or $40
billion,” Thomas Russo, a partner at Berkshire investor Gardner
Russo & Gardner, said after the March 14 announcement of the
Lubrizol deal.

Insurance, Ice Cream

Buffett doesn’t pay a dividend or repurchase stock,
preferring instead to buy companies and securities with his
firm’s profits. In four decades running Berkshire, Buffett has
accumulated more than 70 subsidiaries selling products from
Geico car insurance to Dairy Queen ice cream and NetJets Inc.
flights. The Lubrizol deal, an all-cash transaction, will be
completed in the third quarter, the companies said.

Buffett, whose largest non-U.S. acquisition was the 2006
purchase of Iscar, is traveling in South Korea and India to
visit Berkshire’s operations and look for opportunities. Iscar
was purchased for $4 billion. He visited China in September.

Buffett transformed Berkshire over the last decade by
adding shipping businesses and real-estate brokers to the
company’s insurance, energy and consumer-goods units. David
Sokol, a Berkshire energy executive, said Buffett has the access
to capital and confidence to pounce on an opportunity and isn’t
limited by devotion to certain industries.

Economic Sense

“Warren’s not the kind of investor to buy something
because it fits a plan,” Sokol, chairman of Berkshire’s
MidAmerican Energy Holdings, said in an interview in August.
“He buys something if it makes economic sense and he believes
in the long-term capability of that business.”

Buffett heads a staff of about 20 at Berkshire’s
headquarters and delegates operational authority of subsidiaries
to the CEOs of each unit. His only instruction to Lubrizol CEO
James Hambrick, who will continue running the firm after
Berkshire’s takeover, was: “Just keep doing for us what you’ve
done so successfully” for investors, Buffett said.

Buffett traveled to Europe in 2008, visiting Germany,
Italy, Spain and Switzerland where he touted Berkshire as an
attractive buyer for family-run businesses whose managers may
want to retain roles with the companies they built. That trip
was arranged by Angelo Moratti, an Italian energy executive and
Wertheimer.

Berkshire’s growth has prompted Buffett to focus more on
businesses such as power producers and railroads, which require
consistent investment in infrastructure and equipment. Last
year, Berkshire posted $13 billion of net income and spent $6
billion on property and equipment. He has taken at least $2.25
billion in dividends from Burlington Northern since the February
2010 takeover.

Pricing Power

The most important criteria when evaluating a business is
pricing power, Buffett told the Financial Crisis Inquiry
Commission in May.

“If you’ve got the power to raise prices without losing
business to a competitor, you’ve got a very good business,” he
said in a recording released by the FCIC in February.

Buffett has said he also focuses on a company’s management
and ability to distinguish its products from those of
competitors when deciding whether to invest.

Buffett’s investment criteria include companies with “good
returns on equity,” little or no debt, “simple” businesses
that he can understand, and consistent earnings, he said in
Berkshire’s latest annual report. Buffett doesn’t participate in
auctions for companies and can tell prospective sellers within
five minutes of an offer if he is interested in making a deal,
he said in the report.